FreshDirect Said Planning to Raise as Much as $200 Million

FreshDirect Inc., the New York-based online grocer, plans to raise as much as $200 million to expand in Washington and Baltimore, according to two people with knowledge of the situation.

FreshDirect is working with Deutsche Bank AG on raising funds, said one of the people, who declined to be identified as the plans are private. Scott Helfman, Deutsche Bank’s spokesman, declined to comment.

The grocer, led by Chief Executive Officer Rick Braddock, currently operates in the five boroughs of New York and parts of New Jersey and Connecticut. In July, Braddock told Bloomberg News the grocer might pursue an initial public offering to help fund its expansion.

“FreshDirect has been experiencing over 20 percent sales growth and will expand beyond the Tri-state” area, according to an e-mailed statement from the company. “Baltimore and D.C. are among the target expansion markets. We do not comment on any fundraising details.”

The company, founded more than a decade ago by Joe Fedele and Jason Ackerman, raised $31 million in 2003 in a private placement led by American International Group Inc.-sponsored investment funds with $15 million. The remaining $16 million was funded by individual investors including CIBC Capital Partners, Canyon Partners and Mercantile Capital Partners LLC.

FreshDirect vies for customers with other Internet food retailers such as Peapod, acquired by Royal Ahold NV in 2001. U.S. grocery chains such as Kroger Co. and Safeway Inc. have faced increasing competition from discount retailers such as Wal-Mart Stores Inc. and Target Corp.